- Veerathai's scope limited with borrowing costs near record low
- World Bank sees Thai economy expanding less than 3% until 2017
Steady as she goes. That’s what’s expected of Thailand’s monetary policy under newly-installed central bank Governor Veerathai Santiprabhob, who has limited firepower to spur growth because borrowing costs are already close to a record low.
Veerathai will probably hold the benchmark interest rate at 1.5 percent in his first meeting as governor Wednesday, according to 22 of 23 economists surveyed by Bloomberg. One predicted a reduction to 1.25 percent, matching a 2010 low.
Veerathai, a former International Monetary Fund economist who took office in October, has signaled monetary policy will act as a support, but government spending and investment will drive the recovery. The governor sits on the bank’s seven-member rate-setting committee, which voted to cut the rate twice earlier this year.
“A steady-as-she-goes policy approach is likely to be embraced,” said Weiwen Ng, a Singapore-based economist at Australia & New Zealand Banking Group Ltd. "We can wait a bit to see how the impact from the fiscal policies play out."
Here are some reasons to ease:
* Exports have fallen for nine straight months and will probably shrink for a third year
* Consumer confidence also dropped for a ninth straight month in September
* Manufacturing output has declined every month except one since March 2013
* Consumer prices have fallen every month this year
* A commodities price slump has slashed incomes for millions of farmers in Thailand, the world’s biggest exporter of rice and rubber and second-biggest shipper of sugar
* An El Nino-induced drought further squeezed farm incomes as the government urged farmers not to plant rice in areas dependent on irrigation
And some reasons against another cut:
* More tourists visited in September, defying predictions of a decline after a deadly August bombing in Bangkok. A record 30.3 million may come this year, the government predicts.
* Unemployment fell to 0.78 percent in September
* The government, installed after a coup in May 2014, has set aside funds to help farmers and small businesses and is negotiating with China and Japan to expand its rail network
Still, economists from HSBC Holdings Plc and Credit Suisse Group AG say a rate cut is possible in December. The World Bank forecast Thailand’s economy will expand less than 3 percent until 2017, the slowest pace in Southeast Asia.